$413 million isn’t a ton of money for one of the largest global automakers, but GM’s purchase of Daewoo’s entire share offering still doesn’t completely add up. After all, GM was barred from spending US taxpayer bailout money on overseas assets. And it’s not like GM wanted to increase its stake from 51 percent to 70.1 percent; GM-Daewoo tells Reuters GM had to step in with the cash when the Korean Development Bank, SAIC and Suzuki declined to participate in the rights offering. But under which sofa did GM find the cash? “The money came from GM’s global operations,” is all Daewoo’s reps will say about the matter. And though we could criticize GM for starving its overseas operations in order to keep the wolf from Daewoo’s debt-riddled door, the reality is that few of GM’s divisions are as important as Daewoo for GM’s global product development now that Opel is on the way out the door. The real problem is that this outlay is hardly the last one GM will have to make in order to keep its small-car development hub.
GM’s $413M will be used for “general purposes, including funding the repayment of maturing debt,” according to Daewoo spokesfolks. And they’re already talking about the next round. “Any further actions related to the longer term funding structure of GM Daewoo will be considered if necessary,” is the good word. And it will be necessary. Daewoo owes the Korean Development bank about $2B, and had been negotiating for another $1B in loans. But now that the KDB’s Daewoo stake has been reduced from 28 percent to 17 percent, there’s incentive for the bank to keep funding the struggling automaker. Especially since GM apparently hasn’t agreed to KDB’s key terms, including the size of the rights offer (it was supposed to be closer to $800M . . . what does that tell you?), the sharing of jointly-developed platform licenses and a bank-appointed CFO. And though a $413M bailout is worth the price for GM right now, that was just a stop-gap. If Daewoo is going to be worth anything going forward, GM has to not only handle Daewoo’s debt, it also has to jump-start development work. Now GM gets to learn the lesson it already taught US taxpayers: one bailout usually leads to another. But where’s the money going to come from?